Archive for November, 2007

According to the Pacific Business News this week, foreclosure filings in Hawaii in October 2007 were up 102% from 2006, but the actual number of filings is still exceptionally small as compared to the rest of the country, up from 65 filings to 131…….which means Hawaii ranks 43rd in the country for its foreclosure rate, according to the latest survey by California-based real estate research firm RealtyTrac.

Curb Appeal

When preparing to sell your home, take time to consider the importance of curb appeal.

Curb appeal is the physical appearance of your property as seen from the street. Will the exterior appearance of your property help or hinder your efforts to sell your home? How will your home appear to a prospective buyer as he or she drives up to your home for the first time?

Some of the following tips may give your home a competitive edge in the eyes of a buyer:

LANDSCAPING:
All shrubs should be neatly trimmed and cut to a size that allows them to be in proportion to the size of the house. Shrubs that are too large will dwarf the house and diminish its attractiveness. The lawn should be cut regularly so as to have a neat and well-maintained appearance. If there is a “for sale” sign in the front yard, be sure to trim around ft. If there is tall grass around a sign, people will surmise that the home has been on the market a long time.

CURTAINS:
Curtains should be clean and hung evenly. Avoid gaudy colors in any curtains that can be seen from the street. Go out in front of your home and check the appearance of the curtains in all windows facing the street. Dirty or uneven curtains will give a bad impression to a buyer before they have a chance to inspect your home’s interior.

GARAGE:
Try to keep bikes, toys, tools, lawn equipment and other outside items in the garage. Also, keep the garage door closed as much as possible. A garage and its contents can be an unneeded distraction to an interested person viewing your home from the street. Most multiple listing services hire a professional photographer to take a picture of your home for insertion in the multiple listing book that is distributed to local Realtors. A closed garage door will enhance the quality of the photograph.

ADVICE:
You never have a second chance to make a first impression. The exterior appearance of your home is critical to a successful sale. Ask your Realtor® for suggestions regarding how to improve the curb appeal of your home.

1. Don’t Get “Pre-Qualified!” Get “Pre-Approved”

Do you want to get the best house you can for the least amount of money? Then make sure you are in the strongest negotiating position possible. Price is only one bargaining chip in the negotiations, and not necessarily the most important one. Often other terms, such as the strength of the buyer or the length of escrow, are critical to a seller.

In years past, I have always recommended that buyers get “pre-qualified” by a lender. This means that you spend a few minutes on the phone with a lender who asks you a few questions. Based on the answers, the lender pronounces you “pre-qualified” and issues a letter that you can show to a seller. Sellers are aware that such letters are WORTHLESS, and here’s why!
None of the information has been verified! Unknown problems can surface for example: recorded judgments, child support payments due, glitches on the credit report (due to any number of reasons both accurately and inaccurately), down payment funds that have not been in the clients’ bank account long enough, etc. So the way to make a strong offer today is to get “pre-approved”. This happens AFTER all information has been checked and verified. You are actually APPROVED for the loan and the only loose end is the appraisal on the property, the clear title and termite report. This process takes anywhere from a few days to a few weeks depending on your situation. It’s VERY POWERFUL and a weapon I recommend all of my clients have in their negotiating arsenal.

2. Sell First, Then Buy

If you have a house to sell, sell it before selecting a house to buy! Let’s pretend that I go out looking for the perfect house for you. I find it and you love it! Now you have to go make an offer to the seller. You want the seller to reduce the price and wait until you sell your house. The seller figures that’s a risky deal, since he might pass up a buyer who DOESN’T have to sell a house while he’s waiting for you. So he says OK, he’ll do the contingency but it has to be a full price offer! So you see, you paid more for the house than you could have because of the contingency. Now you have to sell your existing house, and in a hurry! Otherwise you lose the dream house! So to sell quickly you might take an offer that’s lower than if you had more time. The bottom line is that buying before selling might cost you TENS OF THOUSANDS of dollars. I always recommend that you sell first, then buy. If you’re concerned that there is not a house on the market for you, then go on a window-shopping trip. You can identify possible houses and locations without falling in love with a specific house. If you feel confident after that, then put your house on the market.

3. Play the Game of Nines

Before house hunting, make a list of nine things you want in the new place. Then make a list of the nine things you don’t want. I call this “NINE OF THIS AND NONE OF THAT”. You can use this list as a scorecard to rate each property that you see. The one with the biggest score wins! This helps avoid confusion and keeps things in perspective when you’re comparing dozens of homes. When house hunting, keep in mind the difference between “SKIN AND BONES”. The BONES are things that cannot be changed such as the location, view, the size of lot, noise in the area, school district, and floor plan. The SKIN represents easily changed surface finishes like carpet, wallpaper, color, and window coverings. Buy the house with good BONES, because the SKIN can always be changed to match your tastes. I always recommend that you imagine each house as if it were vacant. Consider each house on its underlying merits, not the seller’s decorating skills.

4. Don’t Be Pushed Into Any House

Your agent should show you everything available that meets your requirements. Don’t make a decision on a house until you feel that you’ve seen enough to pick the best one. Review the Multiple Listing printout with your agent to make sure that you are getting a COMPLETE list. As recently as 2003-2005, homes were selling quickly, some only a few days after listing. In that kind of market, agents advised their clients to make an offer ON THE SPOT if they liked the house. That was good advice at the time. Today there isn’t always this urgency, unless a home is drastically under priced, and you’ll know if it is.

5. Stop Calling Ads!

A word of caution – agents create ads solely to make the phone ring! Many of the homes have some drawback that’s not mentioned in the ad, such as traffic noise, power lines, or litigation in the community. What’s not mentioned in the ad is usually more important than what is. For this reason, I want you to be very careful when reading ads. Remember that the person writing the ad is representing the seller and not you! The most important thing you can do is having someone on your side looking out for your best interests. Your own agent will critique the property with an eye towards how well it meets your needs and will point out any drawbacks you should know about. So whether you decide to work with me or not, pick an agent you feel comfortable with and enlist the services of that agent as a buyer’s broker. Then you become a client with all the rights, benefits, and privileges created by this agency relationship, and you’re no longer just a shopper. Did you know that many homes are sold WITHOUT A SIGN ever going up or an AD EVER BEING PUT IN THE PAPER? These “great deals” go to those people who are committed to working with one agent. When an agent hears of a great buy, whom do you think he’s going to call? His client, who he has a legal obligation to work hard for, or someone who just called on the phone and said “keep your eyes open”? So, to get the best buy on a property, I always recommend that you hire your own agent and stick with him/her.

Stay Within Your Price Range

Don’t set yourself up for embarrassment or disappointment by looking at homes that you cannot afford to buy. You may feel that my advice is just a matter of common sense and really doesn’t need to be said. The sad reality is, however, that many people begin looking at homes that are not within their reach. Some even go so far as to make an offer on a house, only to find out later that the mortgage lender cannot justify loaning them all the money they will need to make the purchase. This is, of course, embarrassing because the sellers, who took their house off the market, now know that the buyer is not capable of completing the sale.

Another danger of looking at homes above your price range is the emotional letdown that you experience when you finally return to your proper price range and discover that these homes cannot possibly compare with those that are more expensive.

VISIT A MORTGAGE LENDER:
In order to avoid this embarrassment and disappointment, the first step is to visit a mortgage lender who can tell you what you can afford before you begin house hunting. You will receive vital information such as the amount of down payment required, total closing costs, and expected monthly payment.

INFORM YOUR REALTOR®:
The second step is to visit with your Realtor to arrange for the evaluation of homes that are on the market. Be sure to share the information you received from the mortgage lender with your Realtor. This will enable the Realtor to know your limitations and act accordingly.

These two steps will enable you to spend your time looking at homes that are definitely within your price range. House hunting is much more enjoyable when you know that you are financially qualified to purchase every home you see. Once the right home comes along, you can make an offer with the assurance that you will be able to complete the sale.

ADVICE:
House hunting can be a positive experience if you go about it in the proper manner as outlined above. Find out what you can afford at the outset.

Here is an article from my monthly newsletter with content provided by M. Anthony Carr.

In certain neighborhhoods on Oahu, it is a buyers market……

A buyer’s market is technically defined as: “A market condition characterized by an abundance of goods available for sale.”
The in-depth definition from the same source is: “When a buyer’s market exists in commodities, the buyer is able to be selective in purchasing contracts, as there are many individuals wishing to sell. Furthermore, these buyers will generally be able to purchase contracts at lower prices than those that were previously prevalent.”

The simple version is: when no one else wants a product of value — buy it, because the price will be lower whereby you’ll be able to maximize your investment for future gain. In essence — buy low, sell high.

When it comes to purchasing real estate, it’s not as easy as investing in your 401K or savings account. Those are simple. You can select as little as $1 to invest each month or as high as the law will allow — thousands per year.

Most people really don’t worry about how the stock market ebbs and flows as they are using the practice of dollar cost averaging to invest: “Dollar cost averaging is the practice of investing or saving money at specific times, regardless of market conditions or your personal financial outlook,” according to a beginners guide to investing from About.com. The idea is that if you keep investing over the market levels (low and high) you will, through the law of averages, make money in the long haul.

The challenge with that type practice in real estate is that you can’t slip into real estate investing. We don’t buy our housing investments month after month with prices up and down. Instead, we slap down the down payment when it’s time to buy. And wherever the market is, is where we start.

The best strategy for real estate and the best way to make money in real estate is to buy low, when the conditions are in the favor of the buyer to buy. Your start-up purchase is where you “begin” your investment growth — and that’s why I submit to my buyer friends the above headline question, again: “It’s a buyers market. So when are you going to buy?”
Today in many markets you can buy a house for 5 to 10 percent below asking price. For a $900,000 purchase, that’s between $45,000 and $90,000 off your mortgage. On a 30-year fixed rate mortgage at 6 percent, that reduction in mortgage amount would save about $540 per month (more than $6,000 per year).

Then there are the prices. This is where you’re research on the housing market must turn local. The national numbers mean nothing to you when it comes to investing in real estate. Where are your average prices? Are they flat, deflating or appreciating?

Nevertheless, there are hot pocket markets. On the island of Oahu, there are several zip codes that, when looking at the numbers, are technically in sellers markets. In these areas, homes are selling in under 60 days, prices are up, unit sales have outpaced the level from a year earlier and total sales volume is expanding. The thing is, though, the pressure from surrounding zip code markets keep the prices from escalating as fast as their potential.

Let’s review — you have plenty of housing inventory from which to choose. Sales are slow, so sellers are offering thousands of dollars in incentives to tempt you to buy. Prices are flat. Interest rates are still historically low. Sounds to me like the buyer who has been waiting on the sidelines needs to get off the fence and pull out his checkbook. Any thoughts?

Have you noticed a house that seems to stay on the market for a long time?

What thoughts do you have concerning that house after you continue to see the for sale sign in the yard month after month?

Overpriced?
Poor condition?
Do you wonder if there is something wrong with the house?

We have all had these thoughts from time to time. It is always exciting to hear of a home that has just been put up for sale, but many buyers are not interested in seeing a home that has been on the market for a while.

Pricing, condition, location, and timing affect the salability of every home. Of course, you can’t do anything about the location. If your home has been for sale for a long time, however, you can make decisions regarding pricing, condition, or timing.

LOWER THE ASKING PRICE
The quickest decision that will have the greatest immediate impact is to reduce the listed price. This may be necessary because your original price was too optimistic, or perhaps the market has softened since you began marketing your house. A price reduction is a news item that can motivate new buyers to see your home and may cause previously interested buyers to reconsider your home once again.

IMPROVE THE CONDITION
If you don’t want to reduce the price, will you consider investing more money into the house? Dollars well spent may be the inducement needed to generate enthusiasm among real estate agents and their buyers. Your home may require carpeting, painting, drapes, or other decorator items. If more expensive work such as new kitchen appliances is needed, you may want to rethink your unwillingness to reduce the price.

TAKE THE HOUSE OFF THE MARKET
If your house is not selling and you do not want to reduce the price or spend more money fixing it up, you may be better off taking the house off the market for a while and offering it for sale at a later date.

ADVICE:
Don’t choose any of the above alternatives without consulting with your Realtor®.

Should you list your home with the Realtor® who suggests the highest asking price?

The three goals of every seller are to sell at the highest price, in the least time, with the least inconvenience.

If you list with the Realtor who puts the highest price on your home, will this person be able to get you the highest price? You may say yes. If this person believes that the house will go for this price, then he or she will be much more enthusiastic about getting the higher amount. As much as it might seem logical, it usually doesn’t work this way.

Realtors® don’t decide what your home will sell for, buyers make that decision.

The proper role of the Realtor® is to monitor the real estate market and present you with a factual report of current values. Buyers will decide what they think your home is worth. How do they come up with a figure? They compare your home and its features with other homes they inspect and they also receive market information on recent sale prices. As buyers go through this learning process, they become quite knowledgeable about home values and are usually able to recognize a property that is obviously overpriced. There is an old adage in the real estate business that refers to those brokers who give sellers an over-inflated price. This practice in known as, “buying the listing.” This phrase simply means the listing was obtained, not on the merits of the Realtor®, but rather by appealing to the natural tendency of all sellers to want to hear a high value put on their property.

SUGGESTION:
Don’t make the error of listing your home with the highest bidder. If you find that one Realtor® prices your home significantly higher than other estimates, something is wrong. In order to be sure that you are making a proper pricing decision, be sure to ask for actual written market information regarding recent sales so that you may price your home competitively from the outset. Obviously, I would be glad to assist you, if you would like my help……;).

I am consistently asked some of the same questions over and over again, and although some of the answers are the same regardless of whom is asking, often times the answers MUST be very specific to the individual asking the question.

Timing is important in most decisions that we make. This can be especially true when making big decisions such as the purchase of real estate. The right time to buy is different for everyone.

Here are some factors to consider when evaluating the best time for you to act:

YOUR PERSONAL FINANCIAL SITUATION:
Only you know your present and future financial requirements and capabilities. Although you know about your current and foreseeable earnings, you may not know the present value of your existing home if you are a homeowner. You should not guess about the equity in your existing home. Ask a Realtor® to help you ascertain your property’s present worth.

AVAILABILITY OF DESIRED PROPERTIES:
Are there homes available in the price range and area that you want? A scarcity of desirable homes may cause you to pay a higher price than during a slower market. Some areas, however, always have a scarcity because the location is in great demand and any purchase there may be a good investment.

INTEREST RATES:
Although lower interest rate times are more desirable than during times with higher rates, interest rates should not prevent you from buying if you find the right house for you. Remember, you can always refinance the loan sometime in the future, but you can never renegotiate the purchase price of the house itself.

OTHER PERSONAL CONSIDERATIONS:
You may have other reasons to buy or sell real estate other than those factors listed above. Of course, your personal motives should prevail. Regardless of your motives, don’t go it alone. Hire a Realtor® to help you carry out your decision with the greatest chance for success.

No one wants to hear that his or her home is dirty. For this reason, you may not hear your Realtor® comment on the cleanliness of your home when you are preparing to put it up for sale. Every Realtor knows, however, that clean, organized homes sell quicker and at a higher price than competing homes that are not as well kept. In today’s world, everyone is on the go. Single parents are trying to raise their children provide a good home environment, and compete in the workplace for a decent income. Many couples have both spouses working outside the home. Singles also have a busy life that is very demanding and allows for little time to keep the house in shape. o there are many reasons why your home may not be considered clean enough to compete with similar homes for sale. Here are some of the consequences of selling a home that is not as clean as it could be:

Fewer Showings
Soon after your home goes on the market, the word will get out regarding its condition and cleanliness. A clean home will get more showings and quicker showings than others. These showings will result in a higher selling price with minimum time on the market.

Adverse Emotional Impact
If your home is not clean and well kept, potential buyers will begin to worry that there may be other concerns such as mechanical, electrical, or plumbing problems that are not easily detected. If the buyer becomes worried about hidden defects, he or she will either decide to buy another home or make a lower offer on your home. This lower offer often indicates that the buyer may anticipate substantial fix-up and repair bills after the sale. Many of these anxieties could be avoided by keeping your house in the best possible condition while it is being offered for sale.

Advice:
Remember the importance of a clean home when considering ways to maximize your selling price. Also, don’t underestimate the value of cleanliness as an important marketing advantage over competing homes. If you can’t keep it clean, hire professional cleaners during the marketing period.

The Purchase Contract

What is a contract?

A contract is a voluntary agreement between legally competent parties to perform or refrain from performing some legal act, supported by legal consideration.

The Purchase Contract is the legally binding agreement between the buyer (called the “Purchaser” in contract terms) and the seller. The buyer agrees to pay a certain amount of money to buy the house if certain things are done. The seller agrees to sell the house for that same amount of money if certain things are done.

Those “things” that need to be done are called “contingencies”. If a contingency is not met, then, according to the contract, the sale of the house is called off and everyone can walk away legally without being sued for breach of contract.

This blog entry will not go through the purchase contract line-by-line since the standard form in Hawaii is over twelve pages long at present. However, this blog entry will discuss the major points that you, as the buyer or seller, should know which are common to almost all purchase contracts. Here are a few:

- Inclusions
- Exclusions
- Purchase Price
- Mortgage Contingency
- Condition of Premises (Inspections)
- Transfer of Title
- Time Period of Offer

Inclusions and Exclusions

Before we discuss what is and is not included in the sale of a house, let us first define some simple terms.

Real Estate vs. Real Property

This is a common misnomer in the real estate world. Real Estate refers to the plot of land and all things permanently attached to that land, both by nature and man. Trees and buildings that are permanently attached are included in Real Estate. However, when you own a home, you own more than the physical structure and the land and trees. You own the rights to do with that land as you wish (so long as it is within local regulations.)

When you sell your house, you sell those rights as well. If you didn’t, then you could sell your house, and while you no longer own it, you still have the right to live there! Real Property includes both the Real Estate and the Bundle of Rights that goes along with ownership of that Real Estate. However, since ownership implies legal rights, usually Real Estate and Real Property are synonymous.

Personal Property

Personal Property is all property that does not fit the definition of real estate. Personal property is movable, or mobile. Items of personal property include possessions such as refrigerators, drapes, clothing, etc.

Fixtures

This leads us into fixtures. An article of personal property that has been permanently attached to land or a building is known as a fixture and becomes part of the real estate. Examples of fixtures are stairwell railings, elevator equipment, kitchen cabinets, light fixtures and sinks. Almost any item that has been added as a permanent part of a building is considered a fixture.

Sometimes the definition of what is and is not a fixture is difficult to realize. The front door key, for example, is not attached, but it is clearly a fixture that belongs with the house. A chandelier is attached, but can be easily removed. A dishwasher or washer and dryer can be removed.

It is for this reason that the contract allows space for Inclusions.

What is included?

Your Buyer’s Agent will walk through the home with you pointing out items that you may want to include in the contract. The Purchase Contract usually lists a number of items that are commonly included such as built-in kitchen cabinets, shades and blinds, storm and screen doors, alarm systems, etc. There is space to include anything else you wish to buy.

What is Excluded?

Everything else. Anything that is not nailed down or listed in the Inclusions section is, by definition, not included in the sale of the house. If the buyer and the seller agree that the washer and dryer are not staying, it would be listed in this section of the Purchase Contract.

The Purchase Price

The purchase price is the price that you are buying the home for. This amount is split between the deposit that you are including with the offer, and the certified check, that will be payed at the closing. The amount the buyer borrows from the mortgage
bank goes into an escrow account. At closing, that amount, plus the deposit, plus the down payment check, should equal the purchase price

The Mortgage Contingency

This is a major contingency we see in the Purchase Contract. Simply stated, if the buyer does not get approved for the mortgage, the buyer is not required to buy
the house. This section states the amount of time the buyer has to formally apply for the mortgage, usually one week. It also states what happens if the buyer doesnot get approved for the mortgage in a certain amount of time.

The most important part of the mortgage contingency section is the part that states how long the buyer has to get approved for the mortgage. Most Buyer’s Agents will suggest a minimum of a 21-day time frame. This gives the lender bank, 21 days to approve your mortgage. If the buyer does not get approved within that time, the buyer can choose, legally, to not buy the house and walk away. However, if the bank takes too much time and misses the 45 day limit, the seller also has the right to not sell the buyer the house! Meaning, at that point, the seller can walk away from the buyer and sell the house to someone else! This is why it is so important to have the Buyer’s Agent consistentlt managing the banks progress DAILY to get that approval letter as quickly as possible!

This is also why it is so important to get the bank whatever information they need from the buyer as quickly as possible!

Condition of Premises (Inspections)

This is also called the Inspection Contingency. Simply put, if a major problem is found through the inspections, the buyer have the right to legally cancel the contract and walk away without being sued. This section also states the time limit of inspections. In short, you have a given amount of time to get the house inspected. The Buyer’s Agent will take on the responsibility of scheduling the inspections, making sure they are done, and getting the paperwork to the appropriate parties in time to meet this time limit. If the inspections are not done within this time-frame, then it’s too late! If this deadline passes, no matter what comes up in the inspections, you lose the right to back out of the contract to buy the house! A good Buyer’s Agent will not let this happen.

Transfer of Title

This is the ‘guts’ of the contract. The Title is what it’s all about. You are paying money to have the deed to the house transferred to your name. Once your name is on the deed, you own the title.

Time Period of Offer

Simply put, when you make an offer on a home, you put a deadline on how long the seller has to accept your offer. This is a HUGE point that magnifies the difference between the buyer’s best interests and the seller’s best interests. Why?

You make an offer on a home you want to buy. It’s in the seller’s best interest to have as much time as possible to review the offer and make a decision. Let us say, for example, that you give the seller one week to make a decision. Now that seller, more so that seller’s agent, can go out and
broadcast the fact that there is an offer on the table that hasn’t been accepted. No, the Seller’s Agent is not allowed to disclose the terms of the offer on the table, but some other potential buyer out there who showed some interest in the house a week ago might get a phone call from the Seller’s Agent telling him that an offer is on the table and if he still wants to buy the house, he was to submit an offer as soon as possible. In short, the more time you give the seller to accept your offer, the better the chance another offer will be made in that time.

It is in the seller’s best interest to have as much time as possible to accept the buyer’s offer giving him time to see if another, better offer is made in that time. It is in your best interest to only
give the seller 48 hours maximum to accept the offer. Just as the Seller is represented by an agent, this is one of many cases where having a Buyer’s Agent to tell the prospective buyer what is in their best interest and what is in the seller’s best interest is so important.

So feel free and contact me if I can be of service to you, either as a Buyer’s Agent or as a Listing agent…..Either way, I am sure I can assist, advice and represent you to help you achieve your Hawaii real estate goals……Aloha, Jon.